In the UK, the gambling industry is huge. In 2017, government revenue, i.e., tax, from the gambling industry, reached £13.8 billion. Ten years ago, gambling laws in the UK were liberalized. Since then, tax revenue from gambling has risen by 65%. Dec 12, 2018 Gambling tax revenue The gambling sector's income, together with government gambling tax revenue, was £8.36 billion in the period Apr 2007 – Mar 2008. In the period Apr 2017 – Mar 2018, the figure soared to £14.4 billion. The National Lottery, online gaming, and FOBTs were responsible for the surge.
Can gambling be taxed as earnings? Julie Butler considers a recent case on gambling which covers issues frequently raised in the TaxationWeb forum.
Gambling and Taxation
Essentially betting is ‘tax-free' in the UK – the professional gambler is outside the scope of tax. This is confirmed in HMRC's Business Income Manual at BIM22015. The basic position is that betting and gambling, as such, do not constitute trading. This is not a new precedent either. Rowlatt J said in Graham v Green (1925) 9 TC 309: 'A bet is merely an irrational agreement that one person should pay another person on the happening of an event.'
This decision has stood the test of time. In an Australian case, Evans v FCT (1989) 20 ATC 4540, Hill J said: 'There has been no decision of a court in Australia nor, so far as I am aware, in the United Kingdom where it has been held that a mere punter was carrying on a business.' Matrix casino poker tournaments.
A recent case has tested this principle. In Hakki v Secretary of State for Work and Pensions [2014] EWCA Civ 530 Mr Hakki was a professional poker player who made a living from his poker winnings. An order for Mr Hakki to pay child maintenance was applied for through the Child Support Agency by the mother of his children (Mrs Blair).
In accordance with the Social Security Contributions and Benefits Act 1992 (SSCBA 1992) s2(1)(b) and the Child Support (Maintenance Assessment and Special Cases) Regulations 1992 Mr Hakki opposed the application on the grounds that his poker winnings did not constitute ‘earnings' from gainful employment and therefore he was not a self-employed earner, i.e., the profits arose from gambling.
It is very interesting to note that the Upper Tribunal found that for the purposes of SSCBA 1992, gambling could be a trade, profession or vocation, and that Mr Hakki could be said to be ‘gainfully employed' as a ‘self-employed earner' and therefore should pay child maintenance to Mrs Blair.
Mr Hakki appealed to the Court of Appeal. Mrs Blair's barrister argued that Hakki's poker playing amounted to a trade similar to that of a professional golfer or tennis player. The barrister relied on the findings that Mr Hakki:
- Set a target sum to win after which he stopped;
- Selected the table which was most likely to pay him;
- Appeared on a television programme about poker for a few weeks, made it to the final and won a prize;
- Was the owner of his own website and communicated his strategies for online poker;
- Had his poker results over seven or eight years published on two other poker websites; and
- Chose the locations for playing poker.
The Court of Appeal found that even collectively these findings do not amount to such organisation as to constitute a trade, profession or vocation. The Court of Appeal found that gambling is not a trade and the factors surrounding Mr Hakki must be common to many successful gamblers, e.g., choice of location, setting target sums and the table most likely to pay. It was found that isolated appearances on television and Mr Hakki having his own website was not in 2014 evidence of organisation amounting to a trade or profession. It is also very interesting to note that the court was persuaded that it is possible to accept a case in which a gambler's winnings might be taxable, but it found that in this case there was no organised seeking of emoluments and therefore no gainful employment.
This case adds to the ongoing discussion about whether a gambler in certain circumstances can be taxed on his or her winnings.
Will there be future legislation that brings gambling profits into the scope of taxation? There has apparently been nothing to indicate that this is under review despite the advent of very sophisticated techniques to make substantial profits from gambling. It has to be asked, what is 'the case' that the courts can find as taxable? Is that perhaps the case with sophisticated software?
Back to Tax Articles CommentsIn the UK, the gambling industry is huge. In 2017, government revenue, i.e., tax, from the gambling industry, reached £13.8 billion. Ten years ago, gambling laws in the UK were liberalized. Since then, tax revenue from gambling has risen by 65%. Dec 12, 2018 Gambling tax revenue The gambling sector's income, together with government gambling tax revenue, was £8.36 billion in the period Apr 2007 – Mar 2008. In the period Apr 2017 – Mar 2018, the figure soared to £14.4 billion. The National Lottery, online gaming, and FOBTs were responsible for the surge.
Can gambling be taxed as earnings? Julie Butler considers a recent case on gambling which covers issues frequently raised in the TaxationWeb forum.
Gambling and Taxation
Essentially betting is ‘tax-free' in the UK – the professional gambler is outside the scope of tax. This is confirmed in HMRC's Business Income Manual at BIM22015. The basic position is that betting and gambling, as such, do not constitute trading. This is not a new precedent either. Rowlatt J said in Graham v Green (1925) 9 TC 309: 'A bet is merely an irrational agreement that one person should pay another person on the happening of an event.'
This decision has stood the test of time. In an Australian case, Evans v FCT (1989) 20 ATC 4540, Hill J said: 'There has been no decision of a court in Australia nor, so far as I am aware, in the United Kingdom where it has been held that a mere punter was carrying on a business.' Matrix casino poker tournaments.
A recent case has tested this principle. In Hakki v Secretary of State for Work and Pensions [2014] EWCA Civ 530 Mr Hakki was a professional poker player who made a living from his poker winnings. An order for Mr Hakki to pay child maintenance was applied for through the Child Support Agency by the mother of his children (Mrs Blair).
In accordance with the Social Security Contributions and Benefits Act 1992 (SSCBA 1992) s2(1)(b) and the Child Support (Maintenance Assessment and Special Cases) Regulations 1992 Mr Hakki opposed the application on the grounds that his poker winnings did not constitute ‘earnings' from gainful employment and therefore he was not a self-employed earner, i.e., the profits arose from gambling.
It is very interesting to note that the Upper Tribunal found that for the purposes of SSCBA 1992, gambling could be a trade, profession or vocation, and that Mr Hakki could be said to be ‘gainfully employed' as a ‘self-employed earner' and therefore should pay child maintenance to Mrs Blair.
Mr Hakki appealed to the Court of Appeal. Mrs Blair's barrister argued that Hakki's poker playing amounted to a trade similar to that of a professional golfer or tennis player. The barrister relied on the findings that Mr Hakki:
- Set a target sum to win after which he stopped;
- Selected the table which was most likely to pay him;
- Appeared on a television programme about poker for a few weeks, made it to the final and won a prize;
- Was the owner of his own website and communicated his strategies for online poker;
- Had his poker results over seven or eight years published on two other poker websites; and
- Chose the locations for playing poker.
The Court of Appeal found that even collectively these findings do not amount to such organisation as to constitute a trade, profession or vocation. The Court of Appeal found that gambling is not a trade and the factors surrounding Mr Hakki must be common to many successful gamblers, e.g., choice of location, setting target sums and the table most likely to pay. It was found that isolated appearances on television and Mr Hakki having his own website was not in 2014 evidence of organisation amounting to a trade or profession. It is also very interesting to note that the court was persuaded that it is possible to accept a case in which a gambler's winnings might be taxable, but it found that in this case there was no organised seeking of emoluments and therefore no gainful employment.
This case adds to the ongoing discussion about whether a gambler in certain circumstances can be taxed on his or her winnings.
Will there be future legislation that brings gambling profits into the scope of taxation? There has apparently been nothing to indicate that this is under review despite the advent of very sophisticated techniques to make substantial profits from gambling. It has to be asked, what is 'the case' that the courts can find as taxable? Is that perhaps the case with sophisticated software?
Back to Tax Articles CommentsPlease register or log in to add comments.
more.. Latest Tax News and ArticlesClick on the button below to get the most burning tax topics delivered to your email.
Subscribe to Our NewsletterGaming in many of its forms is perfectly legal in the UK through licensed operators. Stepping into a betting shop and placing a bet on a football game is practically a sport in itself in the UK.
People play the lottery, head down to the local bingo centre, have a spin on the fruit machines at the pub, and place plenty of online bets through sophisticated and fun apps and websites.
Of course, with such a large gaming industry, the government is sure to get a piece of that sweet, sweet gaming pie. The UK taxes companies that offer online gambling services to people living in the UK, whether the company is located in the UK or not.
Let's take a look at what they are taxing and how much they're gaining from this lucrative trade.
Taxation of online gambling for UK-based companies
Taxation of online gambling in the UK by UK-based companies can fall under a number of different duty categories. While you might think that online bingo would be covered under Bingo Duty, it's actually classified as Remote Gaming Duty and taxed at 15% of profits. The same goes for online casino gaming, like the casinos over at BossCasino. Lotteries are charged under Lottery Duty, at 12% of all stake money played and payable within the accounting period.
Taxation of online gambling for offshore companies offering betting in the UK
Under UK law, non-UK companies offering betting and/or gaming services to people living in the UK need to register with HM Revenue and Customs, as well as pay tax. There are a few exemptions.
For these offshore companies, they will be required to pay one or more of the following taxes: General Betting Duty, Pool Betting Duty, or Remote Gaming Duty.
General Betting Duty is derived from the profits from general or pool bets that are made by UK customers on horse or dog racing, or bets placed through an offshore betting exchange. The rates for GBD are:
- 15% for fixed odds and totalisator bets
- 3% for financial spread bets
- 10% for all other spread bets
- 15% of the commission charges charged by betting exchanges to users who are UK people
(source)
Pool Betting Duty is derived from profits made on bets that are not fixed odds and not to do with horse or dog racing. This type of tax is charged at 15% of profits.
Remote Gaming Duty is paid by operators for remote gaming profits on bets and games by UK customers, including casino games, freeplays and bingo. Remote Gaming Duty is also 15%.
Do gamblers have to pay tax on their winnings in the UK too?
Under UK laws, there is no taxation on any winnings from betting – meaning if you place an online gambling bet and win a fortune that you can keep every sweet penny of it and none of it has to go to the tax man. The previous taxation required on winnings was done away with way back in 2001. Some other countries and jurisdictions are far more strict. For instance, in Vegas, the rate is 30% for overseas visitors, and 25% for winning for citizens over $5000.
How much is the UK making from online gambling overall?
Gambling Tax Rates
According to Statistica, betting and gaming tax receipts from the UK hit £2.7bn in 2017, over double the amount that it was just 10 years ago. While this figure doesn't distinguish between in-person and on-premise bets compared to online gambling, this is a hefty figure.
In a report from the UK Gambling Commission in 2017, it says that remote gambling is the largest sector within the gambling industry, accounting for 34% of the overall market, with a gross gambling yield for the year standing at £4.7bn, with slot games making up a majority of this figure at £2.6bn.
If we take 15% of that original number of £4.7bn (15% being the taxable rate), we'll see that it amounts to £705mn for the year. That's a whole lot of money going back into the country's coffers from remote gambling and the figure is only expected to climb with more and more companies offering services and more and more players getting in on the action.
Gambling Tax Laws
When you think about it, 15% being fairly much the standard across the board for online gambling taxes in the UK isn't really that much. Income tax rates for individuals in the UK are far higher, 20% and more, unless you're earning under £11,850 per year, when it is 0%. £705mn only amounts to funding for one major infrastructure works project in the UK.
Federal Gambling Tax Rate
Tsa slot sleutel kopen. The taxation rates for online gambling in the UK are fair and the profits made by the government from this activity aren't as staggering as you might have thought. However, it's still an industry on the rise so we may as yet see this taxation profits heading up into the billions very, very soon.